How do you calculate Taxes for a rental?

[Bob Asad]

Let's say your W2 salary job (easy math) is $200,000/yr

If your rental investment for the first year is negative $25k, are you getting taxed on $175k? ($200k - $25k)

The reason it's negative is due to 3.5% depreciation, mortgage interest, property taxes, realtor fees (half a month's rent), homeowners insurance, fixes/costs around the home, etc.

[Michael Plaks]

Quote from @Bob Asad:

Let's say your W2 salary job (easy math) is $200,000/yr

If your rental investment for the first year is negative $25k, are you getting taxed on $175k? ($200k - $25k)

The reason it's negative is due to 3.5% depreciation, mortgage interest, property taxes, realtor fees (half a month's rent), homeowners insurance, fixes/costs around the home, etc.

First - some of what you listed may not be immediately deductible, such as capital improvements, while depreciation may be improved if there is room for deductions. Which brings us to the second:

Second: rental losses do not normally offset a $200k salary. There're some exceptions, such as your spouse qualifying as real estate professional (REPS) or your properties being short-term rentals (STRs). Both come with their own restrictions. 

When your rental losses are not currently available (95% chance), they are reserved for the future moment of selling this property. Again, with various small print involved.